Setting June 15 Date for Tax Vote, Warns of School Cuts
Gongwer News Service, June 1, 2004
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stakes over the current-year budget deficit were stepped up
Tuesday as Governor Jennifer Granholm gave the Legislature two
weeks to complete action on her proposed increases in cigarette
and liquor taxes and sent a warning to schools that they will be
hit with a $50.1 million cut in state aid in July if the tax
plan fails. Republicans legislative leaders said the governor's
options are too narrow and unfairly dump the deficit burden on
Ms. Granholm, in a letter to Senate Majority Leader Ken Sikkema
(R-Wyoming) and House Speaker Rick Johnson (R-LeRoy),
acknowledged the $28 per pupil cut would be "particularly
devastating" to schools, which end their fiscal years June 30.
"I encourage the Legislature in the strongest possible terms to
resolve the '05 budget deficit by June 15," Ms. Granholm told
reporters. That would allow collection of increased taxes to
start as she proposed July 1 and officials said each day of
delay would cost the state $966,000.
"We are near the end," the governor said of the timeframe to
resolve a deficit of $250 million-$300 million. Otherwise, she
said education and health care will bear the brunt of the budget
problem. "We are left with very few alternatives."
Mr. Sikkema and Mr. Johnson said last week after the House
grudgingly approved a modified cigarette tax bill (HB 5632) that
its ultimate fate was tied to an agreement with the governor on
the GOP's economic development package referred to as JOBS II.
The cigarette tax measure - which removed a proposed tax
increase on other forms of tobacco and allowed
wholesalers/retailers to pay taxes on two weeks of inventory at
the current tax rate - would raise about $67 million this year
rather than the $97 million the Granholm administration sought.
House leaders have given little hope for the liquor tax increase
(HB 4865) - worth about $10 million this year - after it went
down to a crushing House defeat in April.
Aside from schools, Ms. Granholm said the revenues are needed to
avoid cuts in the Medicaid program, where she said options are
limited in dealing with higher than expected caseloads. That
could mean cuts in reimbursement rates to providers such as
hospitals and physicians, officials said.
A budget target-setting meeting with legislative leaders and
Budget Director Mary Lannoye is scheduled for 3 p.m. Wednesday
and Ms. Granholm said it is her "fervent belief" that
legislators would like to see the situation resolved without
cutting education and health.
The governor said she supports working with the Legislature on
job creation bills for a long-term strategy, but said it is
"irresponsible" to tie those measures to the current-year budget
fix. She had vetoed a series of GOP-sponsored measures - most of
which had received strong Democratic support - on Friday as she
pointed to technical flaws or failure to actually create jobs.
But Mr. Sikkema said neither side can dictate terms of the
negotiations and suggested the governor was seeking a political
advantage through the budget crisis. Aides said he does not view
the June 15 date as a drop-dead target and that schools could be
reimbursed if in fact they do suffer cuts.
Mr. Sikkema also is proposing the administration and legislators
craft a solution of revenues and cuts to cover both the current
year and upcoming year, as well as dealing with long-term
economic development issues.
"We are not interested in political brinkmanship. We are
interested in working with the governor to solve this two-fold
problem facing the budget, that of a short-term shortfall and a
long-term issue of creating jobs in Michigan," Mr. Sikkema said.
"The approach Republicans support is no different than how the
governor and Legislature worked together in December to balance
the budget and provide businesses a tax incentive to help them
provide healthcare benefits to their employees."
Johnson spokesperson Keith Ledbetter said the general fund could
be used to bail out the school aid fund and that more attention
should be placed on cutting other programs. He also said the
governor should be more open to compromises.
"She shouldn't hold schools and kids' education hostage just
because she doesn't get exactly the plan she wants," he said,
noting the final plan is yet to be developed during Senate
consideration and a likely conference committee. "She has to
work with the Legislature and we with her. What's disconcerting
among Republicans is why does she have to have the budget
balanced on tax increases rather than spending cuts."
House Republicans had passed $266 million in spending cuts for
the 2004-05 fiscal year and Mr. Sikkema will on Wednesday
present to his caucus $1.047 billion in cuts that would be
needed in 2004-05 if no new revenues are approved.
Those demonstrate a scenario if the budget were to be balanced
solely with budget reductions, Sikkema spokesperson Bill Nowling
said. "That means closing prisons, cutting school aid, hitting
higher education with another 6 percent cut and cutting
Mr. Sikkema had asked staff to look at how the budget could be
balanced if no new revenues are added, but Mr. Nowling quickly
added, "He thinks this is bad policy to go this route. But we
have a lot of people in this town who think we can balance the
budget with no revenue and no cuts and that ain't going to
Mr. Ledbetter said there is a willingness by the GOP to look at
more cuts this year if the only other option is cuts to
education which would be unfairly hurt if they had to absorb
reductions in state aid this late in their fiscal years.
"Instead of cutting state employees, they are suggesting we cut
school employees, cut education for kids," he said.
The governor said her budget-balancing proposal already included
$150 million in cuts, a figure that included savings from debt
refinancing, an accounting change affecting payroll, repeal of
an unused tax credit, using federal funds to replace some
general funds and a change in retirement system costs charged to
agencies without affecting the system.
Ms. Lannoye said the state is hamstrung in its options for the
current year, noting the employee concession agreements barred
The notice of a $28 per pupil proration cut in school aid is the
second notice the state has sent this year to schools, which
were pared by $84 per pupil in January. Ms. Granholm then
declared in February that she would not cut education again.
Michigan Association of School Administrators Executive Director
Michael Flanagan said several hundred districts that could have
relied on a fund balance in years past to deal with a new cut in
state aid no longer have that option because those funds have
been depleted. "I don't know how you deal with another $28 at
the end of the year," he said. "It's just too late."
Mr. Flanagan said the move would force many districts into
deficit, which would trigger a deficit-reduction process and
impair their bond ratings.
Justin King, executive director of the Michigan Association of
School Boards, said the cut would put districts "in deep
trouble". He said the state needs to examine its tax structure
to avoid this kind of recurring problem.
The governor also renewed her criticism of the House-passed bill
for the provision allowing two weeks worth of higher tax revenue
to be retained by wholesalers and retailers. "The House took a
first step by passing a version of the cigarette tax, but they
put $35 million in the hands of tobacco interests rather than in
the hands of public schools," Ms. Granholm said. "I can't
Polly Reber, president of the Michigan Distributors and Vendors
Association, objected to characterizing the provision as a
windfall for tobacco, saying it would lessen the burden on small
business and keep some jobs in Michigan that would otherwise be
lost as legal tobacco sales fall by anywhere from 15 percent to
The problem is particularly acute for businesses in areas
bordering other states, and Ms. Reber said the money would will
"allow retailers and wholesalers to perhaps survive, lessen the
blow and hopefully the surrounding states will increase their
excise taxes so we can be competitive."
House OKs Higher Limit on Work Hours for
Gongwer News Service, June 1, 2004
Some teenagers would be allowed to work greater hours under a
bill on its way to Governor Jennifer Granholm.
Sixteen- and 17-year-olds currently can have a week with a
combined 48 hours of school and work, which effectively leaves
about 18 hours available for work during the school year. The
bill (SB 320) would instead allow such teenagers to work up to
22 hours per week and dump the combined cap on school/work
The bill would not affect regulations on 16- and 17-year-olds
that prevent them from working more than six days in one week or
10 hours in one day.
Supporters of the bill, including a large number of business
groups, say the combined cap presents a burden for businesses,
which must determine how many hours each of their student
employees of the affected age can work. This issue can be
particularly tricky for businesses that employ students from a
variety of school districts, which can have varying hours, they
"It's a win-win for employers and students by making it easier
to track the number of work hours students put in and eliminates
any confusion when employing students from different districts
over how many hours each is enrolled in school and, therefore,
allowed to work," said Rob Gifford, executive director of the
Michigan Restaurant Association, in a prepared statement.
But opponents, led by organized labor, say the bill would
detract from what should be a student's focus on school, not
And Governor Jennifer Granholm opposes the legislation. Granholm
press secretary Liz Boyd would not flatly promise a
gubernatorial veto, but strongly suggested one. "We believe
students should be spending their time studying and being in
school as opposed to working longer hours," she said.
A sizeable bloc of Democrats joined most Republicans in passing
the bill on a 75-31 vote. That's two more votes than necessary
to override a possible Granholm veto, but it's unlikely
Democrats would pick this piece of legislation as the rallying
point for a rare override.
One Health Care Plan for All Teachers
MIRS, June 1, 2004
Some southeast Michigan school superintendents are calling on
the state to provide one health care provider for all school
employees around the state, thus ending the current system
whereby each district negotiates its own health care coverage.
The Detroit Metro Bureau, which operates in cooperation with
Wayne State University, has adopted a resolution that said,
"What we are advocating is that the health care negotiation
process be removed from the local school district which is
powerless to address the escalation in costs that will
eventually cripple all health care plans for school employees
The controversial plan, according to group leaders, is not a
plot to end coverage provided by MESSA, which is the health
insurance arm of the Michigan Education Association (MEA).
"I'm not targeting the MEA," explained Dr. Tom McLENNAN, the
executive director of the Metro Bureau. "Frankly, I don't care
who gets the statewide contract," he goes on.
By placing State of Michigan negotiators in charge of finding an
"all-inclusive statutory plan" that would give the state a
"stronger position to control escalating costs" the resolution
The group fears that ever increasing health care costs averaging
between 10 percent and 25 percent each year will eventually
bring school districts to their knees financially. The group
argues a unified system will lead to savings on prescriptions
while providing a "state-of-the-art monitoring program to assure
The school leaders in the resolution say they are not seeking a
free ride on health care costs and if a one-bid system is
implemented, "school districts anticipate that each district's
Foundation Grant will be reduced" by their present health care
cost per pupil.
The Metro Bureau has formed a work group that is fine-tuning
this proposal. Former Insurance Commissioner Frank Fitzgerald is
a member and the talks are under the auspices of the Clark Hill
legal firm in Okemos.
The chair of the Senate Appropriations Committee, Sen. Shirley
JOHNSON (R-Troy), is interested in this unified approach to
health care costs and is aware of the organizations suggestion.
The critical issue of how this new system would be funded is not
addressed in the document obtained by MIRS.
Newest ISD Bill Staying Put
MIRS, June 1, 2004
Today, House Government Operations Committee Chair Jim KOETJE
(R-Walker) told his fellow committee members that he was not
ready to take up HB 5962, his bill to give voters the ability to
limit the powers of larger Intermediate School Districts (ISDs).
Koetje introduced HB 5962 last week and it was on the agenda for
today's Government Operations' Committee hearing today.
Under the bill, ISDs that do not include a school district with
75,000 students or more, would be required to place a ballot
issue on the June 2005 school election asking voters whether
they want to cease ISD operations and divert all ISD tax revenue
to constituent districts.
MIRS asked Koetje today if his bill should be considered as part
of the overall ISD package of bills that emerged from the ISD
review subcommittee chaired by Rep. Ruth JOHNSON (R-Holly).
"No," Koetje said. "They are aware of this, but they haven't
worked on it with me. If it lies with anyone, the fault lies
Koetje said he introduced the bill because he believes local
voters should have the chance to vote on the possibility of
shifting education dollars to possibly more efficient uses.
"Let the voters decide," Koetje said. "If they decide to keep
their ISDs as is, that's alright with me."
Based on the fact that there was not enough support in the House
to pass a version of HB 4338 that would have given local voters
a means of choosing whether or not their local ISD board should
be selected by popular vote (See MIRS March 17 edition), it
would seem that the future of HB 5962 is bleak.
Ultimately, back on St. Patrick's Day, the House passed a very
watered-down version of HB 4338 which some observers argued had
little or no teeth in it.
Since that bill passed the House, Johnson has followed up with
legislation, the so-called ISD transparency bills (See MIRS May
7) designed to bring more accountability to ISDs in the wake of
the Oakland ISD scandals of the past couple of years.
Some see Koetje's bill as a potential stick that ISD reformers
might want to play at some point if negotiations on some of the
other ISD legislation becomes bogged down. However, such a stick
wouldn't be of any use unless it was believed that the votes
would materialize to back it up.
Michigan Medicaid Long Term Care Task Force
MIRS, June 1, 2004
Today, Gov. Jennifer GRANHOLM announced that she has appointed
the members of a task force specifically designed to improve
Michigan's long-term care service network.
"The Michigan Medicaid Long Term Care (LTC) task force will set
short-term goals for the next three to five years and develop
long-term solutions for the next two decades," Granholm said.
"The work of this task force will be vitally important as we
seek to improve community-based care for seniors, eliminate
unnecessary regulatory barriers, and lessen the enormous
pressure on the state's Medicaid budget."
The 21-member LTC task force, chaired by RoAnne CHANEY of the
Michigan Disability Rights Coalition, will include:
- Wardeh (Rose) ALCODRAY-KHALIFA, Oakwood Healthcare, Inc./Amer-Arab
- Gerald BETTERS, Pinecrest Medical Care Facility
- Reginald CARTER, Health Care Association of Michigan
- Sen. Deborah CHERRY (D-Burton)
- Mark CODY, Michigan Protection and Advocacy Service
- Thomas CZERWINSKI, Area Agency on Aging of Western Michigan
- Rep. Matthew GILLARD (D-Alpena)
- Sharon GIRE, Director of the Office of Services to the Aging
- Sen. Beverly HAMMERSTROM (R-Temperance)
- Martin HARDY, Greater Grace Temple
- Dohn HOYLE, Executive Director, Washtenaw Association of
- Yolanda McKINNEY, Caring Hearts Home Care
- Jennifer MENDEZ, Professor, Wayne State University
- Marsha MOERS, Cap Area Center for Independent Living
- Janet OLSZEWSKI, Director of the Michigan Department of
- Rep. Rick SHAFFER (R-Three Rivers)
- Susan STEINKE, Community Operations for AARP Michigan
- Joe SUTTON, Sutton Advisors
- Marianne UDOW, Director of the Department of Human Services
- Tony WONG, Michigan Association for Centers for Independent
Granholm has charged the Medicaid LTC task force with:
- Reviewing reports and the efficiency and effectiveness of the
current mechanisms and funding for the provision of Medicaid
long-term care services in Michigan.
- Examining and reporting on the current quality of Medicaid
long-term care services and making recommendations for improving
home-based and community-based long-term care services.
- Analyzing and reporting on the relationship between state and
federal Medicaid long-term care funding and its sustainability
over the long term.
- Identifying and recommending benchmarks for measuring
successes in the provision of Medicaid long-term care services
and for expanding options for home-based and community-based
long-term care services.
- Making recommendations to effectively reduce barriers to the
creation of and access to an efficient and effective system of a
continuum of home-based, community-based, and institutional
long-term care services.
The LTC task force was created by Executive Order on April 2.
The task force is required to issue an interim report on its
activities, including preliminary recommendations, by October 1,
2004, and must issue a final report no later than April 1, 2005.
"Our system of long-term care in Michigan is often fragmented
and over-reliant on nursing home services," said Janet OLSZEWSKI,
Director of the Department of Community Health. "Creation of
this task force comes at an opportune and unique moment. In the
next 20 years, our long-term care system also will be taxed as a
result of 'baby boomer' retirements."
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